Van Dyck Law, LLC is a full service Estate Planning & Elder Law practice. They write about comprehensive planning in the areas of wills, trusts, powers of attorney, medical directives, Elder Law and probate & estate administration.

July 2016

07/29/2016

“As a parent loses a spouse, becomes less physically capable or becomes more financially dependent the issue arises for the adult children: Should I take care of Mom myself?”

People wonder if they should bring their aging parent to live with them. Typically, this issue comes up when one parent passes away. When that happens, the parent may remind the adult child of the promise he or she made some time ago that “you’ll never put me in one of those homes.” Most children agreed readily without much thought. But time changes things, says the Forbes article “Aging Parents and The Rise of the Multi-Generation Household.”

Families who must address this question should look at how things might be in the future, both short and long term. Can family members manage a parent’s care needs—with more medical equipment and increasingly frequent trips to the doctor, therapy and the pharmacy for meds? An adult child has to assume increasing obligations to transport and accompany the parent to his or her appointments, advocate and care for the parent, and monitor the medications, diet and follow-through. This burden can become unbearable for some, and living with a parent and satisfying all of his or her care needs can be too great a task.

For some families with kids in the house and both parents working, it can be nice to have a grandparent there to babysit—if he or she is able. Also, if the older parent can help with the family chores, it’s great. As the grandparent ages, children can learn responsibility in helping to care for a dependent person, which can help them mature. Plus, the one household can make the best use of the aging parent’s assets. But this situation doesn’t always work out, and it isn’t for everyone. There can be tension from having an in-law in the house, and adoring grandchildren may grow into reluctant teens.

It’s good to have a backup plan in place now for the possibility that the caregiving responsibilities in the future will be too great and become too much for one primary caregiver. Care facilities have their place and may be the best option in some situations.

07/28/2016

“As the life expectancy of disabled adults increases, it’s increasingly complicating one issue for their aging parents: retirement planning.”

Having a special needs child adds complexity to retirement planning. Parents must pay attention to minute but critical details—like beneficiary designations for their workplace 401(k)—while trying to save as much as possible for their own retirement and at the same time trying to ensure that their child will have care after they’re gone.

A recent MarketWatch article, “Parents of special needs children plan for two futures,” says that you’re planning for two lifetimes. In 2030, there will be approximately 1.2 million adults age 60 and older in the U.S. with developmental disabilities. That’s about twice as many of the 642,000 who fit that profile in 2000, according to 2012 research by the University of Illinois at Chicago. Also, according to the National Down Syndrome Society, today people with Down syndrome have a life expectancy of 60, compared with just 25 in 1983.

It’s critical that parents make certain that any savings and investments won’t disqualify their child from means-tested government benefits, which can impact the parents’ ability to save for retirement. To avoid this, parents should ask an elder law or estate planning attorney to help them create a special needs trust. The assets held in the trust for the disabled person won’t affect his or her eligibility for government benefits.

But remember, rather than naming a special needs child as the direct beneficiary of any asset, parents with a special needs trust for their child should name the trust the beneficiary. Parents can use their 401(k) or IRA funds as needed during retirement and any remaining funds will flow to their beneficiary only on their death.

There’s also a 529 ABLE account, which can hold up to $100,000 in assets without jeopardizing a special-needs adult’s eligibility for means-tested government benefits. Families are able to contribute up to the maximum gift exclusion each year.

At some point, parents themselves will need care—in addition to their child. Diminished capacity in aging parents can mean a need for outside help, which can be very costly. Parents should consider getting long-term care insurance coverage at age 50. That’s when they’re still healthy enough to pass medical underwriting but may no longer have large expenses like a home mortgage or college tuitions for other children.

Although expensive, long-term care policyholders can realize certain tax breaks. The IRS stipulates that qualified long-term care insurance premiums are an expense that can be funded through health savings accounts up to certain limits. Plus, long-term care expenses themselves can be paid out of an HSA, provided they meet certain criteria. HSAs offer other tax advantages. The money isn’t taxed when deposited but appreciates on a tax-deferred basis, and it can be withdrawn tax-free to pay for qualifying medical expenses now or in retirement.

The best way to ensure your financial decisions will not negatively impact your child’s eligibility for means-tested benefits is to work with an experienced elder law attorney.

If your loved one is aging, you should seek help from an experienced attorney and implement the following advice to best support your loved ones.

First, it’s important to emphasize that these folks are “resizing,” not downsizing. Moving to a new home is the start of the next chapter in their lives—rather than the end.

Accentuate the positive and get them to think about what they’re gaining rather than losing.

Keep in mind that the seniors, as well as their families, are under tremendous stress. Staying calm and being organized is a big source of support. When you help your loved ones “resize” to a smaller space, start early and allow them the time to go through their things to decide what belongings they want and which ones they need. Possessions in the “need” category take priority over those they want.

It’s nice to get a floor plan of the new home to help determine what furniture they’ll be able to take with them.

Also, by thinking ahead about what to do with the possessions they’ll need to part with, your loved ones might find a worthy charity that would receive their donations. To help with the transition to their new life, encourage them to consider it giving and not losing their possessions.

07/25/2016

“Just because someone is a family member and wants to help out, they might be over their heads in this very important role.”

It’s smart to work with an estate planning attorney to set up a will or a trust. But it’s not so wise to put these documents away with your high school varsity jacket in moth balls. These important legal documents must be reviewed with some regularity.

For example, you may be surprised to learn that the individual you chose to be a successor trustee is no longer willing to serve in that capacity when the time comes.

If you have a revocable living trust, you may have designated yourself as trustee to manage your own financial affairs. However, at some point, someone will need to step in when you’re unable to act because of your own incapacity or death. The successor trustee will be given a lot of responsibility. You may choose an adult child, another relative, a trusted friend, a bank trust department, a trust company or a professional trustee—and it should be someone you know and trust. In addition, this person or corporate entity should be someone with sound judgment who will abide by your wishes. The successor trustee doesn’t need to know all of the particulars now because your estate planning attorney can assist them later.

So how does this work?

In the event that you become incapacitated, your successor will assume control of your finances. He or she will pay the bills and make decisions on financial issues. After you pass away, your successor will act much like an executor under a will—taking inventory of your assets, paying your final bills, selling assets if necessary, having your final tax returns prepared and distributing your assets according to the instructions in your trust. It can be a large amount of work. It may take a year or more to complete the process.

When you think about selecting a successor trustee, consider these factors:

The type and amount of assets in your trust;

The complexity of your trust documents;

The personalities of your potential trustees, their financial or business experience and their availability; and

Your potential trustees’ willingness to serve.

Remember that trustees should be compensated for serving, so your trust document should detail fair and reasonable compensation. Follow these steps and increase the odds of everything working out.

07/22/2016

“I’ve heard there’s a new kind of 529 plan that can be used for disabled people — specifically for their long-term care. Is that true?”

This isn’t exactly a 529 plan. However, it’s sort of like one. It’s a new kind of account that’s similar in some ways and is designed especially for those individuals with disabilities.

An NJ101.5 article, “Special accounts for the disabled,” explains that President Obama signed the Achieving a Better Life Experience (ABLE) Act in 2014 as part of the Tax Increase Prevention Act of 2014. The law allows qualified individuals with disabilities to have tax-free savings accounts in which they can save up to $100,000 without jeopardizing eligibility for Supplemental Security Income (SSI) and other means-tested government programs like Medicaid. SSI benefits are suspended for individuals whose accounts are over $100,000, but their Medicaid benefits will continue.

The plan is modeled on 529 college savings plans, and interest earned on savings is free from income tax; however, contributions to the account will not be tax-deductible.

ABLE accounts are different from 529 plans in that the funds in these accounts can pay for education, health care, transportation, housing and some other similar expenses. To qualify, an individual has to have a disability that happened prior to age 26. Also, each individual with disabilities may have only one ABLE account, and the annual contributions are capped at the federal annual gift tax exclusion. That’s $14,000 this year.

Any funds that remain in the account when the account beneficiary dies must first be used to repay Medicaid for expenses incurred on behalf of the beneficiary.

States can offer these types of plans to people with disabilities, but they first must adopt regulations before financial institutions can offer the plans. Right now, Ohio is the only state in the country that currently offers such a plan, but other states’ residents can open an Ohio STABLE account.

The ABLE Act gives those caring for special needs loved ones another tool. However, the establishment of first- and third-party special needs trusts should be considered when contributions exceed the amounts allowed under the Act or when third parties don’t want their assets to be subject to a Medicaid payback.

A qualified elder law attorney can help guide you through your options.

07/21/2016

Older Americans forfeit approximately $37 billion annually to financial fraud. However, new legislation under consideration in Congress would impose more stringent penalties for these crimes in an effort to combat the rising rate of exploitation.

The bill also promotes interagency coordination in elder abuse cases. This will include improvement in investigation and prosecution, as well as enhancing survivor assistance and data collection.

Fraud schemes targeting seniors are expected to increase, given that the number of people over 65 will more than double from 46 million currently to 98 million by 2060. It’s estimated that seniors lose anywhere from $3 billion to $36.5 billion each year to fraud and financial abuse.

While the elderly may not be defrauded at as high of rates as younger consumers, the types of scams perpetrated against them have a more significant effect. The most common of these scams concern lottery winnings and prize promotions, in addition to fraudsters representing that they are technical support specialists who can “fix” non-existent computer problems.

Early detection is the key to fighting these schemes, experts say. Also, providing law enforcement with the tools, especially in preliminary kinds of assistance in identifying these schemes, is a critical component.

07/20/2016

U.S. Representative Gwen Graham from Tallahassee, Florida, recently announced that she plans to introduce new legislation that would allow states to create a searchable registry of those convicted of elder abuse.

As reported in a recent jcfloridan.com post, “Graham legislation would create elder abuse registry,” Congresswoman Graham made the announcement during a “Workday” event in Tallahassee. She was assisting Elder Care Services in delivering prepared meals to senior citizens in the area.

Graham remarked that the proposed legislation would direct the Department of Justice to create a model registry for use by states. This would be a searchable registry to help identify people who were found to have committed abuse, neglect, mistreatment or financial exploitation of any individual over the age of 65 in that state.

Congresswoman Graham said the federal government would then compile the information on state registries and make the data available in a national database. States could then mandate that health care providers run a person’s name through the registry before hiring that worker.

“My new legislation would create a registry to identify those who have been convicted of abusing or scamming seniors and prevent them from causing more harm,” said Graham.

Graham said statistics from the Florida Department of Children and Families show there were more than 2,500 cases of elder abuse and neglect in the state during 2015. Florida has seen a 74% increase in the past five years.

Delaware and some other states already have similar registries in place. Florida doesn’t; however, even though the state doesn’t currently have a registry like the one Graham is proposing, failure to report known or suspected abuse of elderly or disabled adults is a crime.

07/19/2016

Good news for older parents: your children will help support and care for you as you age. That’s according to a new study from Fidelity Investments. However, the bad news is that most families don’t agree on exactly what that help should be and the types of responsibilities children should assume.

Fidelity’s most recent Family & Finance report surveyed two members of each family—one parent and one adult child—on things such as retirement income, eldercare and estate planning. The results found that about 40% disagree on the roles children should play as parents age.

Money’s recent article, “Here’s What Your Aging Parents Say They Want You to Do for Them,” says that these kinds of mismatches can create major emotional and financial problems down the road. Families should not wait until a health crisis or other unexpected event demands a caregiving or financial planning conversation; it is far better to have these conversations in advance of any triggering events. One clear finding on financial support for parents was that while over 90% of parents who responded said they wouldn’t like to become financially dependent on their children, only 30% of children shared that view, and about 25% are already planning to support their parents financially.

There were other expectation differences with financial assistance tasks. About 70% of parents expect that at least one of their children will help manage investments and retirement finances, and about the same percentage thought the kids would pitch in on household expenses, budgeting, and bills. However, 36% of children didn’t know they were expected to handle investments, and 44% were unaware their parents wanted help with household budgets.

The big reason children are clueless when it comes to what their parents expect is the simple fact that their parents have never told them. That’s a problem. There are many reasons why parents might choose to give responsibilities to one child over another, like location or having a particular skill set that makes them better qualified to handle certain roles. However, if that person doesn’t know the plan, they won’t be prepared, which could be problematic. It could mean a lack of access to paperwork, delays, confusion and extra expense—not to mention poor care.

When asked about family conversations, most respondents said they’d never had detailed conversations about topics like long-term care, living expenses in retirement, estate planning and the location of important documents. The survey found that the majority of both parents and children felt that discussions about financial planning don’t need to happen until the parents have retired and either health or finances are an issue. But this might be too late. To eliminate any confusion and to clarify expectations for all family members, conversations should happen well before parents intend to retire or health issues arise.

A qualified elder law attorney can help facilitate family understandings on these important matters.

07/18/2016

“Community property laws are, in short, a mixed bag, sometimes a boon and sometimes a nightmare.”

Many married couples living in the U.S. own assets that are deemed legally separate. This may include a business or real property purchased in one person’s name alone. The reason for this designation is that the laws of most states treat married individuals as financially unrelated to their spouse, except for joint accounts and those assets specifically mentioned in a will. However, there are some states called community property states that have different laws on this issue.

As a result, it’s important to know about community property laws in the event you move to one of these jurisdictions or already live in one.

Barron’s article, “How Community Property States Are Different,” explains that Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are the states in which everything you acquire during a marriage is considered legally owned by both spouses. For example, their state statutes view a couple as the co-owners of a business with a 50-50 partnership.

Here are a few other issues to consider.

Premarital assets. Typically, any wealth acquired before the marriage and any inheritances acquired at any time by one spouse are not the property of the other spouse. If you intend to keep them separate, leave them out of your community accounts created after the marriage. If you want to join finances, an estate planning attorney can help you with pre- and post-marital agreements and community property agreements to pool assets.

Estate plans. In most states, a married couple’s assets are divided evenly in life, and the same is true when one dies. One half of the couple’s assets become part of the estate, which can make for major taxes in some situations. If a couple buys a home for $1 million, which then appreciates to $5 million, half of the value of the home—or $2.5 million—becomes a part of the decedent spouse’s estate. It’s given a step-up in basis—a readjustment of the value of the home to the market price over what was initially paid. But the surviving spouse keeps the original cost basis of $500,000. If that spouse wanted to sell the property upon the death of the spouse, he or she would have a cost basis of $3 million (the $500,000 cost basis plus the adjusted basis of $2.5 million) amounting to a $2 million capital gain.

Community property states are a plus in this case because they give a step-up in basis to the entire home. In this example, the surviving spouse will also get a step-up in basis, which means if he or she sells the home there would be no capital gains tax owed. However, the step-up in basis can complicate wealth transfer planning.

Gifting. In community property states, both spouses have to agree on gifts from joint funds. No one can make a gift of your property without your consent, and without that consent, the spouse who didn’t make the gift can revoke the gift at a later date. It’s best to make sure it’s in writing—even when it’s a gift to each other.

Life insurance. Talk with an experienced estate planning attorney before you create an irrevocable life insurance trust. For example, a husband creates an irrevocable life insurance trust to benefit his wife, and the trust buys a $10 million life insurance policy on his life. He will need to be certain that any gifts made to the trust and used to pay the premiums are paid for from a non-community property account—payments cannot come from a joint account. Otherwise, it places a portion of the trust into the estate of his wife, which defeats the purpose of having an irrevocable life insurance trust in the first place and subjects it to an estate tax. Sign a transmutation agreement, which makes the gifts to the trusts entirely one person’s.

It’s important to remember that when community property laws are advantageous to your situation, you can carry community property over with you when you move to a new state. An agreement can preserve the community property state of already-acquired assets and conserve joint trusts to save them from getting comingled with assets in the new state.

Be sure to consult with a qualified estate planning attorney who understands community property law.

07/15/2016

“We’ve all seen it on TV and in movies, as well as in real life: wills can trigger nasty squabbles and bruised feelings.”

Without some communication about what’s in a person’s will, there can be big surprises when this individual passes away—especially if children or grandchildren are cut out. A recent business2community.com article, “How to Successfully Contest a Will,” says that if you are left out of a will you may be pretty upset. Although you may never know why your loved one made this decision, there are some steps you can take.

Contesting the will as a spouse: the right of election. If your spouse left you out of his or her will, you would be entitled to the right of election in most states. This means that you can reject the will and get a certain dollar amount or percentage of the estate pursuant to state probate law.

Contesting the will as another type of heir. Other than a surviving spouse, no one has an automatic right to inherit anything, meaning a person can cut out anyone they choose. However, people can contest the will’s validity on other grounds:

Improper signing: If the will wasn’t signed in accordance with state laws, the will may be thrown out. For example, in most states a testator must sign the will in the presence of two witnesses who are unrelated to him or her by blood or marriage.

Lack of capacity: We’ve seen this many times in the case of billionaires changing their wills right before they pass away. If the testator can be shown not to have had the capacity needed to create and sign the will, then the will may be invalidated. People who have dementia can still be considered capable of executing a will if they intermittently displayed the necessary mental capacity.

Undue influence or fraud: What if a person was forced to sign the will or signed it without realizing he or she was signing a will? What if someone swapped pages in the will when the signature happened? In each of these instances, the will could be invalid.

A later will or codicil: A will can be invalidated if another one, signed later, is discovered. The most recent will is used, and it’s as if the old one doesn’t exist. If the testator signed a codicil or amendment to the existing will, both the codicil and will are probated. Any changes or additions made in the codicil will control the distribution. A codicil can also be contested, just like a will.

When a will is invalidated, a number of things could happen. If there’s an older will that was signed before the now invalidated one, that one could take effect if the court approves it. If there’s no other will, the estate is divided according to the terms of state intestacy laws. Typically, assets are divided among the spouse and children. Other relatives may get something if there’s no spouse or child.